Asian currencies fall most in six months, euro drops

Bloomberg

Asian currencies had the biggest weekly drop since November last year as concern Europe’s debt crisis would worsen spurred demand for US dollars amid signs the US and Chinese economies were losing momentum.

The Bloomberg-JPMorgan Asia Dollar Index fell 0.9 percent this week as global funds pulled about US$1.9 billion from stocks in Taiwan and South Korea. The won and Malaysia’s ringgit saw their biggest losses since September last year, while India’s rupee sank to an all-time low.

The New Taiwan dollar lost 0.7 percent to NT$29.63.

The won fell 2.2 percent from its May 11 close to 1,172.73 per US dollar in Seoul. The ringgit dropped 2 percent to 3.1350 in Kuala Lumpur. The rupee slid 1.5 percent to 54.4250 and Indonesia’s rupiah weakened 1.2 percent to 9,356.

“Investors are taking money out from riskier assets given the lingering concerns about Europe’s debt problem and the economic recovery outlook,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team in Tokyo at Mizuho Corporate Bank. “It’s a double-whammy for Asian currencies as many countries depend on exports for growth.”

The Reserve Bank of India and Bank Indonesia have said they would buy their currencies to counter depreciation, while Bank Negara Malaysia said the country could weather any setbacks arising from Europe’s debt crisis.

“Strong market forces in favor of the dollar have created panic,” said J. Moses Harding, executive vice president at IndusInd Bank Ltd in Mumbai. “The Reserve Bank of India does not have enough ammunition to fight against the tsunami-like ferocious headwinds the rupee is facing.”

The yuan weakened 0.28 percent this week to 6.3284 per US dollar in Shanghai and touched 6.3307, the weakest level since March 15, according to China Foreign Exchange Trade System. The People’s Bank of China lowered its reference rate 0.41 percent to 6.3209, the biggest weekly decline since August 2010.

The central bank in Asia’s biggest economy cut lenders’ reserve requirements effective on Friday for the third time in six months to support the economy, which expanded in the first quarter at the slowest pace since mid-2009. Goldman Sachs Group Inc lowered its forecast for second-quarter growth to 7.9 percent from 8.5 percent, according to a research note published on Friday. The bank reduced its projection for this year to 8.1 percent from 8.6 percent.

Thailand’s baht dropped 0.5 percent this week to 31.33 per US dollar in Bangkok. A government report tomorrow may show the economy shrank 0.9 percent in the first quarter, according to the median estimate in a Bloomberg News survey of economists. GDP slumped 9 percent in the final three months of last year as the worst floods in almost 70 years damaged factories and crops.

The Philippine peso depreciated 1.6 percent to 43.247 against the greenback, while Vietnam’s dong dropped 0.1 percent to 20,848.

SLUMPING EURO

The euro fell for a third week against the US dollar, reaching a four-month low, after the failure of Greek leaders to form a government increased concern the debt crisis may spread to other nations in the eurozone.

The euro currency dropped for a fourth week against the yen as investors await a June 17 election in Greece and amid a G8 summit meeting that began on Friday. Higher-yielding currencies, including Brazil’s real, slumped as increased concern about the euro crisis damped demand for risk. The yen rose to a three-month high against the greenback.